Section 1. Definitions.

The following terms, when used herein (and in the attachments hereto) with initial capitalization, shall have the meaning specified in this Section 1. Certain additional terms are defined in the attachments hereto. The singular shall include the plural and the masculine shall include the feminine and neuter, and vice versa. "Includes" or "including" shall mean "including without limitation." References to a section or attachment shall mean a section or attachment of this Servicing Order, as the case may be, unless the context requires otherwise, and reference to a given agreement or instrument shall be a reference to that agreement or instrument as modified, amended, supplemented or restated through the date as of which such reference is made (except as otherwise specifically provided herein). Unless the context otherwise requires, references to Applicable Laws or Applicable Tariffs shall be deemed references to such laws or tariffs as they may be amended, replaced or restated from time to time. References to the time of day shall be deemed references to such time as measured by prevailing Pacific time.

1.1. ACH - Automated Clearing House, a nationwide payment and collection system which provides for the electronic distribution and settlement of funds.

1.2. Act - Chapter 4 of Statutes of 2001 (Assembly Bill 1 of the First 2001-02 Extraordinary Session) of the State of California, as may be amended from time to time.

1.3. Additional Charges - Additional Charges shall have the meaning set forth in Section 7.2 below.

1.4. Aggregate Power - DWR Power, Utility-Provided Electric Power, and, subject to Section 4.3 of the Rate Agreement, ESP Power or other third party-provided Power for Customers located within that Utility's service territory, to the extent DWR Charges are authorized to be imposed on any such Power by Applicable Commission Orders.

1.4.5. Allocated Contracts - The long-term power purchase agreements, listed on Schedule 1 of the Operating Order, allocated to Utility under the Contract Allocation Order.

Applicable Commission Orders -

Such rules, regulations, decisions, opinions or orders as the Commission may lawfully issue or promulgate from time to time, which further define the rights and obligations of the Parties under this Servicing Order.

Applicable Law -

The Act, Applicable Commission Orders and any other applicable statute, constitutional provision, rule, regulation, ordinance, order, decision or code of a Governmental Authority.

Applicable Tariffs -

Utility's tariffs, including all rules, rates, schedules and preliminary statements, governing electric energy service to Customers in Utility's service territory, as filed with and approved by the Commission and, if applicable, the Federal Energy Regulatory Commission.

Assign(s) -

Assign(s) shall have the meaning set forth in Section 14.3(c).

Bankruptcy Court -

The United States Bankruptcy Court for the Northern District of California, San Francisco Division, in which the Chapter 11 reorganization case involving Utility as a debtor in possession is pending as of the Effective Date.

Billing Services - means

Consolidated Utility Billing Service.

1.11. Bond Charges - Bond Charges shall have the meaning set forth in the Rate Agreement.

Bureau -

Bureau shall have the meaning set forth in Section 8.2(b).

Business Days -

Regular Monday through Friday weekdays which are customary working days, excluding holidays, as established by Applicable Tariffs.

Business Hours -

The period on a Business Day from 9:00 a.m. until 5:00 p.m.

1.15. C.E.R.S. - California Energy Resource Scheduling, a division of DWR.

Charges -

DWR Charges and Utility Charges.

1.17. Claims - Claims shall have the meaning set forth in Section 12.

Commission -

The California Public Utilities Commission.

Confidential Information -

Confidential Information shall have the meaning set forth in Section 6.1(c).

Consolidated Utility Billing Service -

Billing service through the use of Consolidated Utility Bills as described in Service Attachment 1 to this Servicing Order.

Consolidated Utility Bill -

A consolidated bill prepared and presented by Utility to a Customer which includes both the Customer's Utility Charges and DWR Charges.

1.21.3 Contract Allocation Order - Decision 02-09-053 of the Commission, issued on September 19, 2002, as such Decision may be amended or supplemented from time to time by the Commission.

1.21.7 Contracts - The Allocated Contracts and the Interim Contracts.

Customer -

A retail end-use customer in Utility's service area that purchases (or is deemed to purchase) Aggregate Power.

Daily Remittance Amount -

Daily Remittance Amount shall have the meaning set forth in Section 4.2(a).

Daily Remittance Report -

Daily Remittance Report shall have the meaning set forth in Section 4.2(b).

Day-Ahead Market -

The daily ISO forward market for which energy and ancillary services are scheduled for delivery on the following calendar day.

Delinquent Payment -

Delinquent Payment shall mean the payment of any amount due under this Servicing Order after the time when payment is required to be made hereunder, as further described and/or limited hereunder.

Discloser -

Discloser shall have the meaning set forth in Section 6.1(c).

Reserved.

Reserved.

DWR Charges - Bond

Charges, Power Charges and any other amounts authorized to be collected from Customers pursuant to the Rate Agreement.

DWR Power -

The electric power and energy, including but not limited to capacity and output, supplied by DWR to Customers pursuant to the Act and Applicable Commission Orders.

DWR Revenues -

Those DWR Charges collected from Customers required to be remitted to DWR by Utility and DWR Surplus Energy Sales Revenues.

1.32.5. DWR Surplus Energy Sales Revenues - Revenues received by Utility for the sale of surplus Power to third parties that Utility is required to remit to DWR, consistent with the Contract Allocation Order, Exhibit C of the Operating Order and Attachment J hereto.

DWR's Agent -

DWR's Agent shall have the meaning set forth in Section 8.2(b).

Effective Date -

The date this Servicing Order is effective in accordance with Section 14.16, as such date is set forth on the cover page hereof.

1.35. Electric Service Provider - Electric Service Provider has the meaning set forth in the Rate Agreement.

1.36. ESP Power - Power sold by an Electric Service Provider to Customers.

1.37. Event of Default -

Event of Default shall have the meaning set forth in Section 5.2.

1.38. Final Hour-Ahead Schedule - The final schedule of DWR Power submitted by DWR and Utility and published by the ISO for the Hour-Ahead Market.

1.39. Fund -

Fund shall have the meaning set forth in Section 13.2.

1.40. Governmental Authority -

Any nation or government, any state or other political subdivision thereof, and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to a government, including the Commission.

1.41. Governmental Program -

Any program or directive established by Applicable Law which directly or indirectly affects the rights or obligations of the Parties under this Servicing Order and which obligates or authorizes DWR to make payments or give credits to Customers or other third parties under such programs or directives.

1.42. Hour-Ahead Market -

The ISO forward market for which energy and ancillary services are scheduled for subsequent hours for delivery on the current calendar day.

1.43. Imbalance Energy - Imbalance Energy has the meaning set forth in Attachment I.

1.44. Indemnified Party -

Indemnified Party shall have the meaning set forth in Section 12.

1.45. Indemnifying Party -

Indemnifying Party shall have the meaning set forth in Section 12.

1.46. Initial Remittance Date -

Initial Remittance Date shall have the meaning set forth in Section 4.2(a).

1.47. Insolvency Event -

With respect to Utility, (a) the filing of a decree or order for relief by a court having jurisdiction in its premises or any substantial part of its property in an involuntary case under any applicable federal or state bankruptcy, insolvency or other similar law now or hereafter in effect, or the appointment of a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for it or for any substantial part of its property, or the ordering of the winding-up or liquidation of its affairs, and such decree or order shall remain unstayed and in effect for a period of 60 consecutive calendar days; or (b) the commencement by it of a voluntary case under any applicable federal or state bankruptcy, insolvency or other similar law now or hereafter in effect, or the consent by it to the entry of an order for relief in an involuntary case under any such law, or the consent by it to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for it or for any substantial part of its property, or the making by it of any general assignment for the benefit of creditors, or the taking of action by it in furtherance of any of the foregoing.

1.47.5. Interim Contracts - The power purchase or exchange arrangements, listed on Schedule 2 of the Operating Order, between DWR and various suppliers entered into by DWR at the request of Utility, and in compliance by Utility under Decision 02-08-071 of the Commission, as such decision may be amended from time to time by the Commission.

1.48. Interim Remittance Methodologies - Interim Remittance Methodologies shall have the meaning set forth in Section 4.2(e).

1.49. ISO -

The California Independent System Operator Corporation.

1.50. Late Payment Rate -

The Prime Rate plus 3%.

1.50.3. Operating Order - The Operating Order between DWR and Utility, dated as of [ ] and approved by the Commission on [ ].

1.50.7 Operating Order Effective Date - The date that the Operating Order is effective in accordance with the provisions thereof.

1.51. Power - Electric power and energy, including but not limited to capacity and output.

1.52. Power Charges - Power Charges shall have the meaning set forth in the Rate Agreement.

1.53. Prime Rate -

The rate which Morgan Guaranty Trust Company of New York, or its successor, announces from time to time in New York, New York as its prime lending rate, the Prime Rate to change when and as such prime lending rate changes. The Prime Rate is a reference rate and does not necessarily represent the lowest or best rate actually charged to any customer.

1.54. Rate Agreement - The Rate Agreement between DWR and the Commission adopted by the Commission on February 21, 2002 pursuant to Commission Decision 02-02-051, as the same may be amended and adopted by subsequent Commission proceedings.

1.55. Recipient -

Recipient shall have the meaning set forth in Section 6.1(c).

1.56. Recurring Fees -

Recurring Fees shall have the meaning set forth in Section 7.1.

1.57. Remittance -

A payment by Utility to DWR or its Assign(s) in accordance with this Servicing Order.

1.58. Scheduled Energy - DWR Power set forth on schedules submitted by DWR to Utility and the ISO, or by Utility to the ISO, as the case may be, in the Day-Ahead Market and Hour-Ahead Market that, pursuant to Section 2.2(b), DWR will provide to Customers.

1.59. Scheduling Coordinator - to - Scheduling Coordinator Trade -

Schedules for energy transferred from one ISO scheduling coordinator to another. Such schedules are deemed delivered by the ISO upon publication by the ISO of the Final Hour-Ahead Schedules.

1.60. Services -

Billing Services, metering services and meter reading services which may be performed by Utility and related collection, remittance and other services provided by Utility for DWR pursuant to this Servicing Order.

1.61. Servicing Order - This 2003 Servicing Order, including all attachments hereto.

1.62. State - The State of California.

1.63. Set-Up Fee -

Set-Up Fee shall have the meaning set forth in Section 7.1.

1.64. Term -

The term of this Servicing Order as set forth in Section 5.1.

1.65. 20/20 Program -

20/20 Program shall have the meaning set forth in Section 4.3.

1.66. Utility Charges -

Charges incurred by a Customer for electricity-related services and products provided by Utility to the Customer, as approved by the Commission and, as applicable, the Federal Energy Regulatory Commission or other Governmental Authority (including, but not limited to, any Competition Transition Charges or Fixed Transition Amount Charges owing to Utility or its affiliates, as those terms are defined under the California Public Utilities Code). Utility Charges shall not include DWR Charges or charges for retail natural gas sales.

1.67. Utility-Provided Electric Power -

Utility-Provided Electric Power shall refer to electricity from Utility's own generation, qualifying facility contracts, other power purchase agreements and bilateral contracts. Utility-Provided Electric Power shall not include DWR Power, ESP Power or any third-party provided power for Customers.

The terms used in the attachments, but not specifically defined herein or elsewhere in this Servicing Order, should be understood by the Parties to have their ordinary meanings.